Shops want rate cut after poor Christmas

Colin Brinsden, AAP Economics Correspondent

Retailers are demanding an interest rate cut after new figures confirmed poor shopping conditions during the Christmas period.

Just a day after the Reserve Bank of Australia (RBA) left the cash rate unchanged at its first board meeting of the year, data showed retail spending growth declined for a third straight month.

Australian Retailers Association executive director Russell Zimmerman said the RBA's decision to leave the cash rate at three per cent was disappointing for retailers.

"Today's figures reinforce the need for rates to be cut to 2.5 per cent to bring economic stability, as well as rates down to interest rates in other comparable overseas economies," Mr Zimmerman said in a statement.

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Australian Bureau of Statistics data showed retail spending declined by a seasonally adjusted 0.2 per cent in December to $21.4 billion, when economists had expected an 0.3 per cent rise.

Retail turnover over the December quarter grew by a slim 0.1 per cent, only a minor improvement on the 0.3 per cent decline in the September quarter, providing only a modest input to economic growth in the final months of 2012.

"The ghost of Christmas past continues to haunt the retail sector," Australian National Retailers Association chief executive Margy Osmond said.

She said the poor result strengthened retailers' calls for the government to take action on the $1000 threshold before GST is collected on imports, which is encouraging many Australians to shop overseas.

"We estimate about eight per cent of Christmas sales were lost to overseas competitors in the latter stages of 2012," Mrs Osmond said.

Shadow treasurer Joe Hockey said the government had no answers to help retailers.

"Retailers are suffering a double impact, recording fewer sales while having to absorb the cost of the carbon tax," Mr Hockey said in a statement.

The largest fall in retail spending came under the "other retailing" category, which includes pharmaceuticals, cosmetics and recreational goods, which fell 2.8 per cent in December.

Spending on cafes, restaurants and takeaway food services dropped 1.1 per cent, while the biggest gain was in clothing and footwear retailing, which rose 2.1 per cent.

"The fact that some retailers are having to heavily discount in order to generate sales has implications for the profitability of these firms, which will ultimately weigh on business conditions and confidence," Macquarie Research economist Gabby Hajj said.

RBA governor Glenn Stevens, in announcing Tuesday's rate decision, said global downside risks appeared to have abated "for the moment at least".

Quizzed on the outlook for interest rates, Finance Minster Penny Wong said that was a matter for the RBA but agreed with the governor's assessment.

"We have seen some of that risk abate, some of that volatility abate, but obviously that still remains the context for what Australia is operating in," she told Sky News on Wednesday.

But the US still had to resolve its fiscal issue, which it had only partly dealt with, while there needed to be a resolution to ongoing issues in Europe, she said.